This is a continuation of the preceding example, where Twill Machinery is building a laying press for an antique book bindery. During the most recent reporting period, Twill incurred the following costs, all of which it records in an overhead cost pool:
|
Expense Type |
Amount |
|
Production facility rent |
$60,000 |
|
Equipment repair costs |
15,000 |
|
Building repair costs |
9,000 |
|
Production supplies |
3,000 |
|
Total |
$87,000 |
Twill allocates overhead costs to jobs based on their use of production equipment. Job 1200 accounted for 12% of total equipment usage during the month, so Twill allocates 12% of the $87,000 in the cost pool to Job 1200 with the following entry:
|
Debit |
Credit |
|
|
Work in process (Job 1200) |
10440 |
|
|
Overhead cost pool |
10440 |
Twill completes work on the laying press and shifts all related overhead costs to the finished goods inventory account. The entry is:
|
Debit |
Credit |
|
|
Finished goods (Job 1200) |
10440 |
|
|
Work in process (Job 1200) |
10440 |